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China’s Copycat Economy: Boon or Barrier?

U.S. Ambassador to China Gary Locke, right, speaks as Li Daokui, director of the Center for China in the World Economy, looks on during a TV debate on the “Next Frontiers of Growth in China” session of the annual meeting of the New Champions “The Summer Davos” held by the World Economic Forum at the Dalian World Expo Center in Dalian, in northeast China’s Liaoning Province, Wednesday, Sept. 14, 2011.

People’s Bank of China adviser Li Daokui and U.S. Ambassador to China Gary Locke squared off Wednesday on intellectual-property protection at a World Economic Forum session in Dalian. The discussion was civil, but the conclusion inescapable: The two countries remain far apart on the divisive subject.

“Mr Locke has been an outstanding U.S. ambassador and has faithfully carried the message that the U.S. wants to give to our audience: to protect the economy there needs to be intellectual property protection. But I disagree,” said Mr. Li, an academic adviser to China’s central bank, during a panel session entitled Next Frontiers of Growth in China.

Responded Mr. Locke: “If China doesn’t strongly enforce intellectual property rights, I’m not saying that innovation won’t occur in China, but certainly, the full potential of Chinese talent will not be realized,” said Mr. Locke.

China’s inconsistent enforcement of intellectual-property laws makes piracy a given in China, allowing many in its key manufacturing and exporting sectors to churn out and sell knockoffs without fear of reprisal. But it also leaves many foreign companies wary of bring some of their best ideas into the mainland.

China’s policy makers say the current environment has helped spur innovation. Mr. Li said that the current regulatory environment hasn’t proven a hindrance to China’s rocketing economic growth over the past three decades.

He acknowledged that “there could be one or two aspects where there could be reform,” though he didn’t provide details. Instead, he suggested China’s priority now should be directly entrepreneurs, especially young ones, rather than putting barriers in their way. Only after the Chinese economy has developed to a certain degree should the authorities turn their focus to intellectual-property protection and nurturing its newly established brands, he said.

Mr. Locke warned that China’s inconsistent intellectual-property enforcement sets a bad overall tone for business. “There has to be predictability, there has be transparency, in how laws are made,” he said. “You cannot go around living in a country where what was perfectly legal for many years is suddenly made illegal…That discourages innovation and puts a dampener on entrepreneurship.”

He also said China could face a flight of talent to other countries if there isn’t sufficient protection of intellectual property rights. “Now that innovation is an important part of every country’s economy, there has to be a foundation that encourages that innovation,” he said.